Many people start private foundations because they want to give back - but running a foundation also takes real work. If you’re spending time managing programs, handling operations, or developing strategy, you may be wondering:
Can I legally pay myself from my private foundation?
The short answer: Yes, but only for legitimate work - not for serving as a board member.
Quick Summary
You cannot be paid simply for being a board member or founder.
You can be paid for verifiable, reasonable, and necessary services to the foundation.
Payments must be properly documented, reported, and approved to remain IRS-compliant.
What the IRS Allows
Private foundations are allowed to pay reasonable compensation for personal services that are:
Necessary to carry out the foundation’s exempt purpose, and
Actually performed (i.e., documented time, tasks, and deliverables).
This includes:
Administrative or executive management
Program development and implementation
Accounting or bookkeeping
Fundraising and grant administration
Communications, marketing, or website management
IRS Reference: Internal Revenue Code Section 4941(d)(2)(E) exempts “reasonable compensation for personal services” from being considered self-dealing.
What’s Not Allowed
Payments are not allowed if they:
Compensate someone simply for serving as a director or trustee
Are above market rate for similar work
Are not backed up by a clear job description, timesheet, or contract
Personally benefit you beyond fair pay for work done
Improper payments can trigger self-dealing penalties, which can result in taxes and fines for both the foundation and the individual involved.
How to Pay Yourself Properly
Follow these steps to stay compliant:
1. Define the Role
Create a written job description outlining:
Duties and responsibilities
Time commitment (hours per week or month)
Deliverables or outcomes expected
2. Research Fair Market Pay
Determine what similar nonprofits pay for comparable work. You can check:
GuideStar / Candid 990 forms
Charity Navigator
Nonprofit job boards (Idealist, LinkedIn, etc.)
Document your research to justify the rate.
3. Establish Board Approval
Even if you’re the founder, your compensation should be:
Voted on by disinterested board members
Recorded in the meeting minutes
Supported by comparable data
4. Set Up Payroll and Recordkeeping
Pay yourself as a contractor or W-2 employee, depending on your structure. Make sure to:
Keep timesheets or invoices for work done
Issue proper tax forms (1099 or W-2)
Track all payments through the foundation’s accounting system
5. Report Properly
Report compensation accurately on your foundation’s Form 990-PF. This includes:
Listing the amount paid
Describing the type of service
Identifying any relationship between the foundation and the individual
Example Scenarios
Situation | Allowed? | Notes |
Paying yourself for sitting on the board | ❌ No | Board service is a fiduciary duty, not compensated |
Paying yourself to manage grant programs or finances | ✅ Yes | Must document work and pay fair market rate |
Paying your spouse for bookkeeping | ✅ Yes | If legitimate, documented, and reasonable |
Paying your child for part-time clerical work | ✅ Yes | Allowed if age-appropriate and paid fairly |
Giving yourself a bonus or “stipend” without records | ❌ No | Risk of self-dealing |
Best Practices for Compliance
Keep detailed records (contracts, meeting minutes, pay documentation)
Use independent board members for approvals
Avoid any payments that could look like personal enrichment
Work with a CPA familiar with private foundations to file your 990-PF correctly
Final Thoughts
Running a private foundation is both a privilege and a responsibility. Paying yourself for genuine work that furthers your charitable mission is perfectly legitimate - but it must be reasonable, well-documented, and transparent.
If you’re unsure how to structure compensation or document it correctly, our AutoPilot Compliance Program can help ensure your foundation stays IRS-compliant year after year.